Financing in 22043>Question Details

Chris, Home Buyer in Virginia

Is it worth it for me to refinance now?

Asked by Chris, Virginia Wed Feb 11, 2009

I purchased a condo in Falls Church, Va back in June 2008. The amount I financed after closing and everything was 154K at 6.375%. It is a VA loan. I can now refinance at 5%. I plan to sell this place within the next 2-3 years. Or I may rent it out for a little while and then sell it. Does refinancing now make sense.

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Yes, an appraisal would be required, especially because home values have depreciated significantly since Chris bought his home back in June 2008. There would have to be enough equity in the home. Without knowing the LTV, it's difficult to say whether the equity is present.
0 votes Thank Flag Link Fri Aug 14, 2009

If he refinanced out of his VA, wouldn't he then have to have an appraisal and meet certain minimum equity requirements?
0 votes Thank Flag Link Fri Aug 14, 2009

Since you indicate that you plan to sell your home within the next 2-3 years, I would recommend you refinance your existing mortgage into a 3/1 or 5/1 ARM, if of course refinancing makes sense.

Based on your original loan size of $154,000 at 6.375, you are paying approximately $961 per month in principal and interest. Your principal balance now is probably about $150,000. Assuming you want to refinance now and your closing costs are $3,000 and you include your closing costs in your new loan amount, your looking at a loan size of approximately $153,000. If you get a 5/1 ARM, you're looking at a mortgage rate of 4.25 paying no points today. That comes to a montly principal and interest payment of approximately $753, which is a savings of $208 per month. Now, divide the closing costs ($3,000) by your monthly savings ($208) and you get 14.42, which represents the number of months it would take to recoup your closing costs. If you plan on staying in your home for at least 15 months, you should definitely looking into refinancing now.

I hope this information helps. Best of luck!

Total Mortgage Services
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0 votes Thank Flag Link Fri Aug 14, 2009
Chris, I would definately look into a streamline as mentioned below. When I see rates drop, I call my VA buyers and tell them to call their lender back and have them run the numbers. Sometimes the fees are so little. No appraisal, mimimal closing fees, etc., If they don't know what a streamline is - move on. I am hoping that you have already done a streamline during the lower rates when 4.675 to 5% was 0/0.
0 votes Thank Flag Link Thu Aug 13, 2009
Will your lender be willing to streamline it. We got ours done. That way you wont have to waste closing cost. Practically just see how much it adds to loan or cash to Refi and add the amount it saves you every month. Then see how many years worth of money you vested upfront. If you save that money with in 2 years and you own it 3-5 years - I feel it is worth but If you save exact same amount over 3-4 years then you know the answer :)
To refi you have to have 20% equity in the primary and these days as I heard 30% in investment
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0 votes Thank Flag Link Wed Feb 11, 2009
Since you own a condominium, you should check with your VA lender and see if there will be any additional penalties in order to finance a condominum product. Underwriting guidelines have become very strict in light of all of the banking issues of late. The secondary mortgage market is now reviewing the "type" of property a buyer is financing, in addition to the financial qualifications of the purchaser. The insurance, budget, by-laws, rules and regulations of the condominum association are all now subject to review by the lender. I routinely work with purchasers who are buying properties held within a condominium regime.

Once you have determined the effect of the interest rate and any other fees included, it would then be the time to decide if it is "worth it" to refinance your home.

Best of luck. My best from the beach.

Monica McNamara
Ocean City, Maryland
0 votes Thank Flag Link Wed Feb 11, 2009
It is only worth refinancing now if you are going to save money in the long run. When you talk to your mortgage loan specialist, get an estimate for your closing costs. Also, get an estimate for your new monthly payments. If the amount that you are going to save in interest in the next 2 years (or the amount of time you plan to keep the property) is greater than the closing costs you will be paying, then I would say yes, it is worth refinancing now. There are also online calculators that can help you make that decision. Also keep in mind that in the new stimilus packages being debated in congress there is talk of guaranteeing lower interest rates for homeowners that want to refinance. I would keep an eye on the latest developments and maybe hold off for a little bit until we know for sure. Good luck!!
0 votes Thank Flag Link Wed Feb 11, 2009

It may......
Our recommendation is to contact a loan specialist for your specific needs. He/she will be able to provide you with the input you require to make an informed decision.

The mistake here, would be to not explore your options.

Good luck
The Eckler Team
0 votes Thank Flag Link Wed Feb 11, 2009
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